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Research
ACC Limited - Tax write back stems decline in profits - Antique
Posted On : 2013-05-06 21:49:46( TIMEZONE : IST )
ACC Limited (ACC) reported numbers for 1QCY13 which were below our estimates on all fronts. The company reported revenues, EBIDTA and PBT of INR29.6bn, INR4.95bn and INR4.45bn against our estimates of INR31.6bn, INR5.8bn and INR4.8bn respectively.
Lower despatches drag revenues
ACC's consolidated revenues for 1QCY13 stood at INR29.6bn, a YoY decrease of 2.9%. The same was led by 4.5% decline in cement volumes to 6.4mmt as realisations were higher by 2.3% to INR4,393/mt. On a QoQ basis, cement realisations witnessed a decline of 1.8%.
Higher operational costs impact margins
EBIDTA margins contracted by 460bps YoY to 16.7% on account of inability to pass on the impact of higher operational costs due to subdued demand scenario. Accordingly, EBIDTA/mt stood at INR772 (our estimate of INR875) against INR968 in 1QCY12. A 56% surge in other income to ~INR1bn coupled with lower tax rate of 1.7% arising from reversal of tax provision relating to earlier years stemmed the decline in adjusted profits to 10% at INR4.38bn.
Capacity expansion of ~5.1mmt by CY15e
ACC's plans to increase its presence in the eastern markets and augment the capacities by 5.15mmt. It is undertaking brownfield expansions at Sindri, Jharkhand (1.35mmt) and Jamul, Chhattisgarh (1.1mmt) and greenfield expansion of 2.7mmt at Kharagpur (West Bengal). It has commenced work on the above projects with placement of equipment orders and groundbreaking at the site. The capacities will be commissioned in a phased manner by CY15e.
Valuation and outlook
At the CMP of INR1,227, the stock trades at a PE and EV/EBIDTA of 15.2x and 8.8x, discounting its CY14e numbers. We believe that the next two quarters will be very challenging for the industry as weak demand scenario would make prices hikes difficult. We maintain our HOLD recommendation with a target price of INR1,191 (previous target price of INR1,425). The target price is based on 8.5x (from earlier 9x) CY14e EV/EBIDTA discounting.
